V. Ratemaking Treatment

A. Background.

Prior to the transition period, both environmental and non-environmental decommissioning cost estimates had been included in base rates and were being collected over time. Pursuant to Pub. Util. Code § 367, and D.97-11-074, decommissioning costs that the utility would retain became a transition cost that had to be collected during the rate freeze. In 1997and 1999, the Commission approved PG&E's site-specific cost estimates to remediate assumed environmental contamination at each divested power plant site and authorized recovery through the TCBA.⁵ And, in 1998, the Commission adopted this same ratemaking methodology for HPPP decommissioning costs, when it adopted the agreement between PG&E and CCSF on the future of HPPP. (See D.98-10-029, mimeo., pp. 9-10.)

B. Discussion

PG&E says that while recovery through the TCBA is appropriate, there is another ratemaking mechanism available that would strike the right balance between ratepayers and shareholder cost recovery risk.⁶ In its 2003 GRC application, A.02-11-017, PG&E has proposed a return to conventional ratemaking treatment for fossil decommissioning costs by including the environmental and non-environmental HPPP decommissioning cost estimates in its depreciation estimates.⁷ By virtue of being included in the depreciation reserve, the HPPP decommissioning estimates will be trued-up to actual costs. This alternative ratemaking mechanism fairly allocates the risk of over and/or underspending between ratepayers and shareholders and could be adopted as an alternative to TCBA ratemaking, according to PG&E.

We agree with PG&E's proposal to address the ratemaking treatment of the HPPP decommissioning cost estimate in its GRC. However, the parties are reminded that we will reject any attempt to relitigate the HPPP decommissioning cost estimate in the GRC.